Entrepreneurship, 1st Edition Page 289 (289 of 560)

289
Section 10.2 Price
July sale may offer 20 percent off an item, but on July 5th, the item is
full price.
Quantity Discount
A quantity discount offers a reduced per-item price for larger
numbers of an item purchased. Many companies offer quantity
discounts as an incentive for buying more product. The more the
customer buys, the more money he or she saves on each item. For
example, if a customer buys 48 sweatshirts, the price may be $22 per
shirt. If the customer buys 96 shirts, however, the price may be $18 per
shirt.
Seasonal Discount
Seasonal discounts are special prices to encourage customers
to buy at off-peak times of the year. For example, swimsuits may be
on sale in February because summer is when most swimsuits are
purchased at full price. Seasonal discounts can also apply to off-peak
days or hours. A restaurant might offer Monday-night specials since
Mondays are slow for the restaurant business.
Discounting methods are often used together, such as seasonal discounts and promotional discounts.
© JohnKwan/Shutterstock

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289
Section 10.2 Price
July sale may offer 20 percent off an item, but on July 5th, the item is
full price.
Quantity Discount
A quantity discount offers a reduced per-item price for larger
numbers of an item purchased. Many companies offer quantity
discounts as an incentive for buying more product. The more the
customer buys, the more money he or she saves on each item. For
example, if a customer buys 48 sweatshirts, the price may be $22 per
shirt. If the customer buys 96 shirts, however, the price may be $18 per
shirt.
Seasonal Discount
Seasonal discounts are special prices to encourage customers
to buy at off-peak times of the year. For example, swimsuits may be
on sale in February because summer is when most swimsuits are
purchased at full price. Seasonal discounts can also apply to off-peak
days or hours. A restaurant might offer Monday-night specials since
Mondays are slow for the restaurant business.
Discounting methods are often used together, such as seasonal discounts and promotional discounts.
© JohnKwan/Shutterstock

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0 290
Chapter 10 Product, Price, and Place
Trade Discount
A trade discount is the amount a vendor reduces the MSRP for
businesses. This is a standard B2B procedure. Manufacturers give
trade discounts to the stores so they can in turn resell the items at the
full MSRP. This takes into account the fact that retailers must mark up
product prices to make a profit.
Prices
After considering pricing factors, pricing objectives, pricing strategies,
and pricing techniques, you are ready to set a price for the product or
service. Review the mission statement and goals for the business to
make sure the price is in line with what the business is trying to do. To
streamline the process, many businesses use web-based pricing software
or other pricing technology. Automating the process using technology
makes it efficient and saves time in monitoring pricing.
Remember that pricing strategies may change as a business grows.
Take into account that most businesses cannot sell every product at
the list price. Some products may be put on sale, some on permanent
clearance, and some donated to a charity.
Global Entrepreneurs
Mark Zuckerberg
In the early 2000s, Mark Zuckerberg was at Harvard
University studying computer science and psychology and
already had the knowledge to create a website. Little did
he know then that in a few years the website he was to
create would be the foundation of the multibillion dollar,
international corporation Facebook. Zuckerberg founded the global social
networking website Facebook with three of his Harvard classmates.
Facebook started on the Harvard campus as a website called
FaceMash. Facebook was launched on February 4, 2004. Initially, it was
only open to Harvard students. In March 2004, Facebook expanded
to other Ivy League schools, including Columbia and Yale, as well as
Stanford and NYU. In October 2005, Facebook went global. It expanded
to the United Kingdom, Puerto Rico, and Mexico first, followed by other
countries. Facebook’s international headquarters is in Dublin, Ireland.
Facebook earns revenue primarily by selling advertisements that are
placed on Facebook pages, but a small percentage of revenue comes
from payments and fees. Over one-third of Facebook’s revenue comes
from international sources, and international revenue has been increasing
every year. Since its launch in 2004, Facebook has become an essential
tool in the world of international advertising.

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Extracted Text (may have errors)

0 290
Chapter 10 Product, Price, and Place
Trade Discount
A trade discount is the amount a vendor reduces the MSRP for
businesses. This is a standard B2B procedure. Manufacturers give
trade discounts to the stores so they can in turn resell the items at the
full MSRP. This takes into account the fact that retailers must mark up
product prices to make a profit.
Prices
After considering pricing factors, pricing objectives, pricing strategies,
and pricing techniques, you are ready to set a price for the product or
service. Review the mission statement and goals for the business to
make sure the price is in line with what the business is trying to do. To
streamline the process, many businesses use web-based pricing software
or other pricing technology. Automating the process using technology
makes it efficient and saves time in monitoring pricing.
Remember that pricing strategies may change as a business grows.
Take into account that most businesses cannot sell every product at
the list price. Some products may be put on sale, some on permanent
clearance, and some donated to a charity.
Global Entrepreneurs
Mark Zuckerberg
In the early 2000s, Mark Zuckerberg was at Harvard
University studying computer science and psychology and
already had the knowledge to create a website. Little did
he know then that in a few years the website he was to
create would be the foundation of the multibillion dollar,
international corporation Facebook. Zuckerberg founded the global social
networking website Facebook with three of his Harvard classmates.
Facebook started on the Harvard campus as a website called
FaceMash. Facebook was launched on February 4, 2004. Initially, it was
only open to Harvard students. In March 2004, Facebook expanded
to other Ivy League schools, including Columbia and Yale, as well as
Stanford and NYU. In October 2005, Facebook went global. It expanded
to the United Kingdom, Puerto Rico, and Mexico first, followed by other
countries. Facebook’s international headquarters is in Dublin, Ireland.
Facebook earns revenue primarily by selling advertisements that are
placed on Facebook pages, but a small percentage of revenue comes
from payments and fees. Over one-third of Facebook’s revenue comes
from international sources, and international revenue has been increasing
every year. Since its launch in 2004, Facebook has become an essential
tool in the world of international advertising.

288
Chapter 10 Product, Price, and Place
Bundling
Bundling combines two or more services or products for one price.
Bundling can reduce the overall price when compared to buying the
items separately. For example, a clothing store might bundle a $10 hat
and a $20 T-shirt for a single price of $25. This bundled price saves the
customer $5, and the store has sold two items instead of one. Bundling
conveys savings and value.
Price Lining
Price lining is setting different levels of prices for similar products.
This is done to differentiate between the quality and features of
the products. Retailers sometimes use the terms good, better, best to
describe their products and prices. Good conveys value, best conveys
quality, and better conveys a balance between the two.
Discount Pricing
In retail businesses (B2C), when items are discounted from the
list prices, they are on sale. Companies that sell products to other
businesses (B2B) also use discount pricing techniques. The five most
popular forms of discount pricing are:
• cash discount;
• promotional discount;
• quantity discount;
• seasonal discount; and
• trade discount.
Cash Discount
A cash discount is usually a percentage removed from the total
invoice amount. It is offered to encourage a customer to pay a bill
early. A cash discount often shows up in a format similar to 2/10, net
30. The 2 reflects the percentage off the invoice total. The 10 indicates
the number of days the customer has to pay the bill to receive the
discount. The 30 stands for the number of days the customer has to
pay the bill without receiving a penalty. This discount would be read,
“2 percent off if paid within 10 days, otherwise the entire bill is due in
30 days.” Cash discounts encourage customers to pay bills early, which
helps the business’ cash flow.
Promotional Discount
Promotional discounts are offered for a limited time to entice
customers to buy during that period. After the promotional period is
over, the price goes back to the regular price. For example, a Fourth of

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Page 18Unit 1 Entrepreneurship click to expand contents

Page 98Unit 2 Explore the Opportunities click to expand contents

Page 186Unit 3 Building the Business click to expand contents

Page 264Unit 4 Examining the Four Ps of Marketing click to expand contents

Page 352Unit 5 Managing the Business click to expand contents

Page 486Unit 6 Expanding and Exiting click to expand contents

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